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COMPENSATION DIRECTIVE: 2005-023

|   Information Notice to Employees
      - Quebec Parental Insurance Plan
(Revised January 10, 2006)

Information Notice to Employees
      - Employment Insurance

December 1, 2005

SUBJECT: Employment Insurance (EI) and Quebec Parental Insurance Plan (QPIP)

  1 PURPOSE
  1.1 The purpose of this directive is to advise clients of modifications concerning the Employment Insurance (EI) and the introduction of the new Quebec Parental Insurance Plan (QPIP). This directive will describe the premiums, the excluded employment categories, the deductions at source and the employees impacted by the QPIP.
  1.2 Since premiums, minimum and maximum yearly insurable earnings for the EI and the QPIP can change on a yearly basis, a new directive will be issued next year to announce the rates.
  1.3 Two notices of information to employees concerning the above have been included with this Compensation Directive and will also be posted in the "Who are you? - Public Service Employee" page of the Compensation Sector Web site.


  2 CANCELLATION
  2.1 This directive supersedes compensation directives 1996-058 dated December 18, 1996, and 2004-024 dated December 14, 2004.
  3 BACKGROUND
  3.1 Employment Insurance (EI)
    Bill C-12, the Employment Insurance Act, received Royal Assent June 20, 1996.
    The EI remains the same for all provinces and territories except Quebec.
    In Quebec, the EI covers only regular benefits (loss of job due to work shortage), sickness and compassionate care benefits.
    For more information, consult this link:
http://www.hrsdc.gc.ca/asp/gateway.asp?hr=en/
ei/types/qpip.shtml&hs=tyt
  3.2 Quebec Parental Insurance Plan (QPIP)
    On March 1, 2005, the governments of Canada and Quebec signed a final agreement to implement the QPIP.
    Starting January 1, 2006, the province of Quebec will be responsible for the payment of parental benefits related to a birth or adoption of a child for Quebec residents. The QPIP will only replace benefits for the birth or adoption of a child that Quebec residents presently receive under the Employment Insurance Act.
    For more information, consult this link: http://www.rqap.gouv.qc.ca/index_en.asp
  4 POLICY
  4.1 Employment Insurance (EI)
  4.1.1 Definition of insurable employment
    Insurable employment includes most employment in Canada under a contract of service (a contract where the employer pays the employee because an employee-employer relationship exists).
    To consult the complete list of insurable employment, visit this link:
http://www.hrsdc.gc.ca/en/ei/legislation/
ei_act_insuremp.shtml#5
  4.1.2 Definition of non-insurable employment
   
  • Employment that is an exchange of work or services;
  • Employment of a person by the government as a census taker or election worker, if that person:
      (a) is not the government body's regular employee; and
      (b) works for less than 25 days.
  • Employment in Canada under an exchange program, if the employer paying the remuneration is not resident in Canada;
  • Employment in Canada of a non-resident person, if the employment insurance laws of any foreign country require the payment of premiums for that employment;
  • Employment of a member of a religious order who has taken a vow of perpetual poverty and whose remuneration is paid directly to the order, or by the member to the order.
    To consult the complete list of non-insurable employment, visit this link:
http://www.hrsdc.gc.ca/en/ei/legislation/
ei_act_insuremp.shtml#5
  4.1.3 The following types of payments are not subject to EI premiums:
   
  • A supplementary unemployment benefit (SUB) payment, except for other types of benefits paid under a SUB, such as short-week benefits;
  • Any benefit in kind, except the value of board and lodging enjoyed in a period, if you pay cash for the pay period;
  • A retiring allowance;
  • A supplement for any part of an EI maternity or parental benefit period.
  4.1.4 Allocation of insurable earnings
    Insurable earnings are to be considered insurable, for EI premium deductions at source, in the year in which they are paid.
  4.1.5 EI premiums - employee and employer
    Employers have to calculate, deduct, remit and report EI premiums.
    The EI premiums will cease to be withheld once the annual maximum insurable earnings is reached ($39,000 for 2006).
    In situations where the employee changes employer, deductions of EI premiums will recommence along with the employer share of the premiums. The employee's entitlement to a refund will be determined and issued by the Canada Revenue Agency (CRA) upon the employee's filing of his income tax return. Employers are not entitled to a refund of their shares.
    EI premiums - employee working outside Quebec
    Effective January 1, 2006, the employee's EI premium rate (excluding employees working in the province of Quebec), will be decreased from 1.95% to 1.87% of insurable earnings. The annual maximum insurable earnings remain at $39,000. Therefore, the maximum annual premium for the 2006 taxation year is $729.30.
    EI premiums - employee working in Quebec
    Effective January 1, 2006, the EI premium rate for employees working in the province of Quebec will be decreased from 1.95% to 1.53% of insurable earnings. The annual maximum insurable earnings remain at $39,000. Therefore, the maximum annual premium for the 2006 taxation year for employees working in the province of Quebec is $596.70.
    EI premiums - employer outside Quebec
    The employer's regular premium remains equal to 1.4 times the total of the employee's premium.
    EI premiums - employer in Quebec
    The employer's regular premium remains equal to 1.4 times the total of the employee's premium.
  4.2 Quebec Parental Insurance Plan (QPIP)
  4.2.1 Definition of insurable employment
    Insurable employment includes most employment in Canada under a contract of service (a contract where the employer pays the employee because an employee-employer relationship exists).
  4.2.2 Employment categories excluded from the QPIP
   
  1. The employment of a member of a religious order who has taken a vow of poverty and whose remuneration is paid directly or by the member to the order;
  2. Employment as a teacher on exchange from a country other than Canada;
  3. Employment in agriculture, an agricultural enterprise, horticulture, fishing, hunting, trapping, forestry, logging or lumbering either by an employer who pays the employee less than $250 in cash remuneration in a year or employs the employee in the year for cash remuneration, for fewer than seven working days;
  4. Employment as part of an exchange program, if the employee receives remuneration from an employer not resident in Canada.
    To consult the complete list of employment categories excluded from the QPIP, visit this link:
http://www.revenu.gouv.qc.ca/eng/ministere/
centre_information/actualite/2005/
categ_exclue_rqap.asp
  4.2.3 Allocation of insurable earnings
    Insurable earnings are to be considered insurable, for QPIP premium deductions at source, in the year in which they are paid.
  4.2.4 QPIP premiums - employee and employer
    Employers have to calculate, deduct, remit and report QPIP premiums payable by any employee who reports for work at one of the employer's establishments located in Quebec, or whose salary or wages are paid through one of the employer's establishments located in Quebec, if the employee is not required to report for work at the employer's establishment.
    The QPIP premiums will cease to be withheld once the annual maximum is reached ($57,000 for 2006).
    In situations where the employee changes employer, deductions of the QPIP premiums will recommence along with the employer share of the premiums. Employee entitlement to a refund will be determined and issued by the ministère du Revenu du Québec (MRQ) upon the employee's filing of his income tax return. Employers are not entitled to a refund of their shares.
    QPIP premium - employee
    Effective January 1, 2006, the employee's QPIP premium rate, will be 0.416% of insurable earnings. The minimum insurable amount is $2,000. However, the QPIP premiums are charged from the first dollar earned. Employees who earn $2,000 or less within a taxation year will be reimbursed when they file their provincial income tax in Quebec. The annual maximum insurable earnings will be $57,000. Therefore, the maximum annual premium for the 2006 taxation year is $237.12.
    QPIP premiums - employer
    The employer's regular premium will be 0.583% of insurable earnings.
  4.2.5 Trans-border employees
    Contributions to the QPIP will be deducted at source for employees who work in Quebec and live in another province. Employees who live in Quebec and work in another province will not have the QPIP premiums deducted at source.
    Adjustments between the QPIP and the EI deductions for these employees will be resolved through the filing of income tax returns and an annual year-end adjustment process coordinated by the CRA and the MRQ in 2007 for taxation year 2006.
   

Adjustments for employees who change province or change employer within the same year will also be treated at the end of the taxation year by the CRA and the MRQ.


  5 PROCEDURES - INSTRUCTIONS
  5.1 Taken on strength (TOS)
    Upon a TOS, the compensation advisor is required to identify whether the employee contributes to the EI and the QPIP. Since the definition of insurable employment for both plans is identical, only one entry will be required (refer to the Personal-Pay Input Manual [PPIM] Section 3-5-3, Field 40). When the place of work indicates Quebec in the master file, the employee must contribute to the EI and the QPIP.
  5.2 Regional Pay System (RPS)
    The RPS will be updated and programmed to include the QPIP and the EI rates.
    New codes created for the QPIP
    5C4 QPIP current; and
    5C5 QPIP deficiency.
    New fields for the Master Employee Record (MER)
    The MER will be modified to include new fields for the Parental Insurance Plan (PIP):
    Field M761 - PIP premiums
    Field M762 - PIP earnings
    Field M790 - PIP earnings, other pay office (OPO) -- for the update of a transfer-in (TIN) or a transfer-out (TOU)
    Field M791 - PIP premiums, OPO -- for the update of a TIN or a TOU
    On-line inquiry
    The master file of the on-line inquiry database will also be modified.
  5.3 Statement of earnings and financial statements
    The statement of earnings will not be modified in 2006. The QPIP premiums for the current pay period will be posted: QPIP - QPIP deficiency, on the entitlements and other deductions section starting in January 2006.
    The statement of earnings will be modified in 2007 to include the QPIP information. A box will be used to post the QPIP premiums by pay period and the year-to-date cumulative. The new title of the box will be PPIP for Provincial Parental Insurance Plan.
    The T4 and relevé 1 for taxation year 2006 will be modified to include the new information boxes: PPIP insurable earnings, PPIP premiums and exemption code box (T4).
    Pay register
    The pay register will include new codes 5C4 and 5C5 and the amount deducted per pay period on the deductions column.
    Gross to net statement
    The gross to net statement will include new codes 5C4 and 5C5 under a new column called PIP.
    Record of Employment
    For Record of Employment (ROE) for EI and QPIP purposes, clients will need to determine the hours of employment. In cases where the income is not directly related to hours, the earnings are insurable and subject to withholding while the hours are not considered to be insurable hours. For EI, please consult with Human Resources and Skills Development Canada (HRSDC) for assistance and instructions on the completion of the ROE. For QPIP, please consult with the MRQ for assistance and instructions on the completion of the ROE.
  5.4 The PPIM will be updated to incorporate the relative information contained in this compensation directive.
  6 Question and answers on different situations that might happen within the same taxation year
  6.1 What happens if an employee works in Quebec and lives in any other province?
    The employee will have EI premiums deducted at the Quebec rate and the QPIP deducted at source. The CRA and the MRQ will make adjustments when he files his tax return at the end of the taxation year.
  6.2 What happens if an employee lives in Quebec and works in any other province?
    The employee will have EI premiums deducted at source at the rate of the province of work. He will not have the QPIP premiums deducted at source. The CRA and MRQ will make adjustments when he files his tax return at the end of the taxation year.
  6.3 An employee, working for the same employer, transfers from Ontario to the province of Quebec. The employee has reached his maximum premiums for EI in Ontario. What is the effect on EI and the QPIP in Quebec?
    The employee will no longer have EI deducted, but the QPIP premiums will be deducted.
  6.4 An employee, working for the same employer, transfers from Ontario to the province of Quebec. The employee has not reached his maximum premiums for EI in Ontario. What is the effect on EI and the QPIP in Quebec?
    The employee will have EI premiums deducted until he reaches the maximum insurable earnings for the year ($39,000), and the QPIP premiums will be deducted until he reaches the maximum insurable earnings for the year ($57,000).
  6.5 What happens when an employee, working for the same employer, transfers from Quebec to the province of Ontario. The employee has reached his maximum premiums for EI and QPIP in Quebec.
    The EI and QPIP deductions will be stopped.
  6.6 What happens when an employee, working for the same employer, transfers from Quebec to the province of Ontario. The employee has not reached his maximum premiums for EI and QPIP in Quebec.
    The employee will have EI premiums deducted until he reaches the maximum insurable earnings for the year ($39,000). The QPIP deduction will be stopped.
  7 INQUIRIES
  7.1 Any inquiries on the information contained in this document should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.

Original Signed by
Brigitte Fortin


Brigitte Fortin
Acting Director General
Compensation Sector
Accounting, Banking and Compensation


Reference(s): CJA 9006-18


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Maintained by the Compensation Sector
Last Updated: 2006-07-14
Important Notices